I THINK MINING

In this morning’s news is a story about cooperation between a US Democratic Congressman and a Republican Congressman.  They are cooperating to demand that the Justice Department “investigate the environmental track records of Sterlite, its parent company Vedanta and other companies seeking to gain ownership of Asarco.”

Currently Asarco is owned by Grupo Mexico and has been the topic of many a story about a legal battle, so complex I cannot pretend to understand it.  These two paragraphs sum up the issues:

Lawyers for a century-old Arizona-based mining company are set to make their closing arguments in a month-long trial over whether its Mexican parent illegally stripped it of its most valuable asset, leaving the company to flounder into bankruptcy.

Asarco LLC is asking a federal judge in Brownsville to order Americas Mining Corp. to return that asset — a controlling stake in two Peruvian copper mines — and the dividends it has provided. The combined value is estimated to exceed $10 billion.

Deep in the InfoMine Companies & Properties database, we find this: 

Grupo Mexico de Desarollo is one of Mexico’s largest mining groups.  It is a holding company for several operating companies engaged in mining, smelting, and refining in Mexico.  The company mines, refines, and sells coal, copper, gold, silver, zinc, and other minerals.  Its smelters, refineries, and coking plants make nodes, sulfuric acid, lime, bituminous paints, creosote, and more.

Scroll through the many computer screens of information about the company to find snippets of information about Asarco, a sometime independent American mining company and a sometime subsidiary of Grupo Mexico, and you find mere hints of a larger drama. 

I know nothing about the history of Asarco except what I can find on the internet and in the InfoMine files.  If what follows in incorrect, I beg you to accept that it is not the result of intent to mislead, but simply to illustrate how complex the story is and how difficult it is to find the truth even today on the much vaunted internet of “easy access to information.” 

In an InfoMine entry from 1996 I read about Asarco: The company plans to transform from a custom smelting business into an integrated mining company. On April 22, 1999 “Asarco Inc reported a net loss for the three month period ended March 31 of US$35.3 million, compared with US$31.8 million, for the previous year.” A few days later on April 28, 1999 “The Board of Directors of Asarco Inc announced that the company will declare a quarterly dividend on the company’s common stock of five cents per share payable June 2, 1999 to stockholders of record at the close of business on May 12, 1999.”

By July of the same year “Cyprus-Amax Minerals Co. and Asarco Inc. announced that they have agreed to merge in a stock swap worth US$764.2 million that creates the world’s largest publicly traded copper company.”  But things were moving fast on all fronts, for by August “Phelps Dodge Corp announced its intentions to acquire Cyprus Amax Minerals Co and Asarco Inc for stock.”  Through September of 1999 the news reports are of a massive battle to stave off the Phelps Dodge takeover. And by September 27, 1999 “Grupo Mexico SA, reported to be Mexico’s largest copper producer, has made an all-cash tender offer for Asarco.”

The dance continued through October. By October 25, 1999 we find this report:

Asarco and Grupo Mexico have announced that a definitive merger agreement has been signed under which Grupo Mexico will acquire all of Asarco’s outstanding common stock for US$29.75 in cash per share. Prior to entering into the agreement with Grupo Mexico, Asarco paid a US$30 million fee to Phelps Dodge for terminating the October 6 agreement in which Phelps Dodge had agreed to pay US$28.21 in cash and stock for each Asarco share.

As you would expect, from 2000 onwards there are reports of more mergers, changes of corporate structure, property closings and financial losses. For example, in 2001 “Grupo Mexico S.A. de C.V., subsidiary Asarco, has announced an additional curtailment in copper ore production at its Mission mining complex in southern Arizona by 23% due to poor copper market conditions.” And in 2002 “Asarco is looking at the possibility of closing down its Mission unit operations in southern Arizona by the end of the year.”

Environmental issues too were begining to raise their head: “Asarco Inc., a subsidiary of Grupo Mexico, has submitted to the U.S. Department of Justice (DOJ) a proposal for environmental remediation at its closed plants and other sites where the company historically operated.”

And from there on the news releases stop.  Maybe some reliable lawyer put the kabosh on too much flow of information.  Maybe the Mexican philosophy began to prevail. 

And at this point the genius of Wikipedia comes into play.  Here we find a brief but interesting summary of the tale.   

ASARCO LLC is a mining, smelting, and refining company based in Tucson, Arizona that mines and processes primarily copper. The company, a subsidiary of Grupo México, is currently in Chapter 11 bankruptcy. ASARCO plans to emerge from bankruptcy in 2008, and opposes calls for it to totally liquidate its mining and industrial assets.

Its three largest open pit mines are the Mission, Silver Bell and the Ray mines in Arizona. Its mines produce 350 to 400 million pounds of copper a year. ASARCO conducts solvent extraction/electrowinning at the Ray and Silver Bell mines in Pima County, Arizona and Pinal County, Arizona and a smelter in Hayden, Arizona. Before its smelting plant in El Paso, Texas was suspended in 1999 it was producing 1 billion pounds of anodes each year. Refining at the mines as well as at a copper refinery in Amarillo, Texas produce 375 million pounds of refined copper each year.

ASARCO has 20 superfund sites across the United States, and it is subject to considerable litigation over pollution.

India-based Sterlite Industriesannounced the acquisition of Asarco on 31st May, 2008 for US$2.6 billion. Sterlite would become the world’s third largest copper miner with a combined capacity of 650,000 tonnes a year, if the Asarco deal closes. Grupo Mexico, the current owner, opposes the sale, and hopes to block it. 

 It is this last point that brings us up-to-date.  Today’s news includes a piece that starts:

The two top-ranking members of the U.S. House Judiciary Committee Thursday added their voices to the growing chorus opposed to Indian miner Sterlite Industries’ proposed $2.6 billion cash purchase of bankrupt U.S. copperminer Asarco.

In a news release Thursdays House Judiciary Committee Chairman Rep. John Conyers, Jr., D-Michigan, and ranking Republican committee member Rep. Lamar Smith of Texas said they have asked U.S.Attorney General Michael B. Mukasey to order the Justice Department to investigate the environmental track records of Sterlite, its parent company Vedanta and other companies seeking to gain ownership of Asarco.

“We are not aware of whether bidders who competed with Sterlite USA before Asarco’s board and their affiliates have environmental records better than, similar to, or worse that Vedanta’s,” the representatives wrote. “Further we understand that environmental concerns are implicated, not only by what entity assumes control of Asarco’s assets, but by such factors as delays in the resolution of Asarco’s Chapter 11 case and delays in plan distributions. Thus, Vedanta’s environmental record is not the only environmental factor that the department confronts as it conducts its representation of the United Statesin the Asarco bankruptcy.”

“Given the considerable federal liabilities associated with Asarco based on in involvement with contaminated sites…we believe that Vedanta’s environmental track record overseas, as well as all relevant environmental factors bearing on the Asarco bankruptcy should be carefully studied before the Department adopts a final position on whether Sterlite USAor any other bidder should be allowed to acquire Asarco’s assets in the United States,” Conyers and Smith suggested.

Last month, two Arizonamembers of Congress also asked the Justice Department to investigate the environmental track record of Sterlite and its parent Vedanta, prior to giving the federal government’s consent to the Asarco sale. Representatives Gabrielle Giffords and Raul Grijalva asked AG Mukasey to investigate Vedanta’s operating record in India and Africa, which they contend, “does not bode well for responsible stewardship of assets in the U.S.“

This story is long and involved.  But is seems to boil down to the fact that the Mexican company got away with $10 billion of assets and income, and is now dumping Asarco US environmental liabilities onto the taxpayer.  Unless, we can dump the liabilities onto an Indian company.  Even if they are likely to make it difficult to enforce environmental responsiveness. 

This is a perfect example of a refrain I have echoed before.  Companies will do what companies are there for: make money.  Communities and regulators have to police them for otherwise the community will be left with the results.  This is as true in the United States as in any other country.  As this story shows.